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SJM and MGM to outperform in 1Q24 – CITI


Brokerage firm Citi forecasts that SJM Holdings and MGM China are likely to emerge as the operational outperformers for the first quarter of 2024 in Macau’s gaming industry, underlining, especially, MGM’s advantage in the use of radio frequency identification (RFID) technology in gaming tables.

Despite a 6 percent quarter-on-quarter (QoQ) growth in Macau’s gross gaming revenue (GGR) in the first quarter of 2024, Citi anticipates that industry earnings before interest, taxes, depreciation, and amortization (EBITDA) will only increase by 2 percent quarter-to/quarter.

This modest growth is attributed to negative operating leverage resulting from unfavorable hold rates, especially notable in February. However, Citi expects SJM Holdings and MGM China to show relatively better EBITDA improvements for the first quarter.

In particular, Citi highlights MGM China’s technological advantage over its peers, attributing it to the early adoption of smart gaming tables. As a result, Citi has raised its target price for MGM China from HK$16 ($2) to HK$17 ($2.1) and elevated it to the top spot in its pecking order among casino operators in Macau.

The brokerage firm’s 1Q24E earnings preview underscores the impact of unfavourable hold rates on both GGR and EBITDA, with Macau gaming industry’s EBITDA improving by only 2 percent QoQ to $2 billion.

In terms of market share winners and losers, Citi identifies Wynn Macau, MGM China, and SJM Holdings as potential gainers, while Sands China and Galaxy Entertainment Group are expected to face headwinds due to unfavorable hold rates and disruptions from renovation works, respectively.

Citi’s considered that MGM China holds an advantage due to ‘successful market share gains’ through the use of smart gaming tables and RFID chips and expects the concessionaire to maintain its technological advantage over competitors throughout 2024.

Nelson Moura
Nelson Moura
Editor and reporter with 10 years of experience in Greater China, namely Taiwan and Macau, in printed and online media, with a focus on finance, gaming, politics, crime, business and social issues.